Live Updates: Zimbabwe Monetary Policy Statement 2019

Question and Answer & Comments Session

After a question about what happens to the Bond Note following the introduction of RTGS dollars, Mangudya says Bond Notes are part of the RTGS Dollars. Reiterates that RTGS Dollars consist of RTGS Balances, Bond Notes and Bond Coins.

Says Bond Notes are to the RTGS dollars what USD Cash is to Nostro balances.

UZ Economics Professor Ashok Chakravat takes to the podium and reiterates Mangudya’s point that there is no expectation of the exchange rate to increase. The expectation is for it to reduce gradually.

Mangudya responds to questions below:

We are taking the role of ensuring that the value of money is restored instead of leaving that to the parallel market. The variable that is critical to us is inflation. The best way to preserve value for money is to ensure that foreign currency is available and that the forex rate is stable.

Right now the value of money is being eroded by the parallel market.

If we continue with 1:1, the money will be eaten by inflation, which is caused by the pass-through effects of the parallel exchange. The best way to restore value of money is therefore to ensure that we manage inflation and the stability of the exchange rate.

if the rate goes down from 4 to 2.5 it means we are preserving the value of money.

Right now we are so encouraged by the fact that the fiscal side of the equation is ok. Because of the measures we took.

Our target for the rate even though we have left it at willing buyer willing seller we manage runaway inflation in a couple of ways:

we have lines of credit to stabilise exchange rate

the interbank will provide foreign currency to bonafide transactions not for the purposes of funding foreign currency accounts.

we will be watching those who are attempting to manipulating the rates. Our Anti-money laundering monitoring will check on those with too much money in their accounts. We will monitor in terms of the laws in Zimbabwe.

We don’t expect a runaway rate of the exchange rate. We expect the exchange rate to go down.

We have formalised the way to buy foreign currency so that people don’t do it illegally.

Academic, Professor Ashok Chakravat praises the RBZ for taking a brave step in floating the rate. The rate will not be determined on the Interbank Foreign Exchange Market

Mandiwanza Asks if there’s an indication of the rate since the RBZ does not control the rate now?

The Question that keeps coming is “What is the starting rate?”

Question: Do we have a currency now?

Forex Retention

Essential imports shall continue to be made available through letters of credit and allocations by the Forex Allocation Committee.

Gold forex retention has been kept at 55% for large scale gold producers and small scale producers. All other minerals retain 50%. So, RBZ has resisted calls by gold miners to increase the amount of export earnings they can keep. They had pushed for up to 80%. (by newZWire)

Tobacco and cotton growers will now get 30% of their crop sales in foreign currency. Tobacco merchants will retain 80% of their earnings. (by newZWire)

Euro MasterCard and VISA EMV Compliance

80% of the cards in the country are now EMV compliant

All cards should be compliant by 31 March 2019

Cyber Risk Management

Financial services providers are increasingly exposed to cyber attacks which are sophisticated.

Players need to update their cybersecurity services, and IT systems to fight cyber attacks, and submit these to RBZ.

Anti-Money Laundering

RBZ will place focus to ensure compliance by players to ensure that money-laundering is dealt with.

RBZ calls upon all stakeholders to help fight money -laundering.

IFRS Accounting System

Banks will be publicising their 2018 financials on 31st March 2019 based IFRS accounting system.

RTGS Dollars (new currency)

RTGS, bond notes and coins to be immediately denominated as ‘RTGS Dollars’. The legal instrument giving effect to this has been prepared and will be gazetted soon

“RTGS dollars have become one of the currencies in the currency bucket of the multi-currency system of the economy”

The RTGS dollars shall be used by all entities in Zimbabwe for the purposes of pricing of goods and services, debts, accounting and settlement of transactions

We have put in place measures to maintain stability as we establish an interbank foreign exchange market in Zimbabwe to formalise the exchange of Bond and RTGS with USD and other currencies”

Establishment of Interbank Foreign Exchange Market

Bureax de change shall be authorised to purchase forex without limits, but shall be limited to sell forex for small transactions such as subscriptions, business and personal travel up to a maximum aggregate daily limit of US$10 000 per bureau de change.

“Interbank foreign exchange market establishment is important to bring sanity in the forex market and to promote exports. We considered the implications – social, accounting, legal”

The parallel pricing needs to correct the distortions in the market. Monetary policy statement seeks to correct that.

“Redollarisation of the economy will move the economy into depression. The evidence is that those charging in forex have experienced reduced demand for their products. Most have had to revert to pricing in RTGS and bond notes at the parallel market rate”

“Majority of transactions in the market are being conducted in electronic form and bond notes but at the parallel market rate.”

Foreign Currency Deposits Since October 2018

“Separation of Nostro and RTGS FCA has had a very positive effect”. 87.6% growth in deposits

“Foreign Exchange Premiums on the parallel market have increased from 3 – 4 and has had negative effects on inflation and increases the YoY levels”

“We have witnessed significant changes since the last monetary statement in October 2018 ”

1440hrs: RBZ Governor John Mangudya Start presentation

Related

RTGS Dollars

Zimbabwe RTGS Dollars are a Zimbabwean currency introduced on 20 February 2019 by the Reserve Bank of Zimbabwe. At introduction, the currency consisted of existing RTGS balances in bank accounts, Bond Notes cash and Bond Coins. The introduction of the RTGS Dollars was announced by... Read More About RTGS Dollars

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6 comments

Why are neighboring Countries products sold cheaper than we can buy in Zimbabwe ? perhaps the Governor should explain that…or does he know that some of the cause is the high government dutys paid on everything. People will not buy here until prices come in line with other SADAC Countries.

The policy maintains the former status quo of continually de-industrializing and impoverished nation with increasing corruption and sky high unemployment levels as the majority is marginalized to the margins of a grossly skewed development battlefield.

the government should consider that the rate of the money in the balck market will increase due to limits in foreign exchange and better exchange rates in the market it will also affect sole traders and smes who cannot meet foreign exchange rrequirements so they will seek assistance in the black market and great measures economicaly must be taken to avoid a depression